Reforming the property tax regime

In Trinidad and Tobago, the move to introduce a property tax was done to replace the Lands and Buildings taxes which was started in the 1960s specifically post the landmark 1966 Finance Act.

According to former Minister in the Ministry of Finance, Mariano Browne, the attempt to replace the old legislation made significant strides in the early 1990s when certain amendments were introduced at the Point Fortin and San Fernando Borough Corporations for a more modern form of property taxation.

However, this led to a lack of uniformity in rates with effect that the taxes paid on properties in San Fernando and Point Fortin Boroughs were not uniform and were higher than that paid by those using the Land and Building taxes act. He also noted that the Land and Building Taxes Rolls indicated that there were approximately 200,000 properties for which taxes were being collected, while an exercise started by the Commissioner of Valuations (Part of the Ministry of Finance) identified 500,000 properties.

He said this discrepancy demonstrated that the information database had to be updated as there was a significant level of non-compliance since the Land and Building Taxes Ordinance had not been updated for over 50 years.

“While other areas of taxation have simplified and rationalised through ongoing reform, the system of property taxes was fragmented and antiquated in its design and methodology. Reforming the property tax regime was meant to improve and streamline the systems of assessment, management and collection of property taxes throughout the country,” Browne stated.

Browne noted that in addition to “harmonising” a system of property taxation across all of Trinidad and Tobago, the Bill (the Property Tax Bill 2009) had been introduced by him in the Senate on December 29, 2009.

“The property tax was not a new tax, as it sought to develop one system to the one used throughout Trinidad and Tobago with a uniform set of rates based on a uniform principle and common bases of valuation,” he said.

“The rate now proposed is exactly the rates proposed then on the same basis of calculation with the same basis of administration,” he said. Browne said one purpose of that Bill was to provide a system that would ensure that all properties are valued on a consistent basis, as they would be done by the Valuation Division of the Ministry of Finance.

He said consequential amendments to the Valuation of Land (Amendment) Bill would provide Trinidad and Tobago with a single agency for the determination of property values for the purposes of this taxation.

“Another purpose of the Bill is to implement a nationally consistent property tax system with one rate paid on all properties that are in the same category. More specifically, the rates across the board throughout the country in the four categories of properties will be as follows:
• Residential: 3% on the annual taxable value;
• Commercial: 5% on the annual taxable value;
• Agricultural land: 1%; and
• Industrial land: 6% of the annual taxable value.” The rates as well as the method of valuation have not changed since its proposal in 2009.

Asked why the tax was never implemented and what led to the Axe the Tax campaign, Browne observed the Bill was introduced at a time of “great dissatisfaction and coincided with the fall in income resulting from a fall in oil prices as a result of the 2008 recession.” “It was viewed as an attempt to increase taxation to finance the government’s income shortfall and the Axe the Tax campaign fell in with the level of disaffection directed against the then Patrick Manning administration,” he said, adding, “there was substantial disinformation in the political domain at the time which led to great disaffection.” “Implementation was superseded by the general election in 2010 and the campaign promise of the People’s Partnership not to introduce the tax. As such the Bill lapsed and the opportunity to modernise went with it,” he stated.

Browne continued: “There is nothing sinister about this bill. It will raise revenue for the government. It will require citizens to pay taxes that they used to pay up until 2009. But it is critical to the maintenance of a system of land registration and property rights.” “But people always fear change,” Browne stated.

Former People’s Partnership Finance Minister, Winston Dookeran observed that while Property tax is a “good measure for fiscal sustainability,” he pointed out that in a recessionary time, “the impact will be one of contraction, unless other measures are put into place at the same time.” “So, the question is, what is the fiscal and growth package?” Dookeran asked, before stating that the original property tax proposal was “not equitable, affecting the ‘small man’ more than the high value enterprises, hence the difficulty in pushing it forward.” “I do not have the details of the present plan, so it must be assessed for equity. Finally, fiscal measures must have a net stimulus impact on the economy, so this proposal taken in isolation may find the stimulus effect missing? Will it be merely revenue generating without stimulating the economy? And, exactly what is the size of its impact on total revenue?” Dookeran asked.

In the 2017 budget statement, Finance Minister Colm Imbert stated that property tax collections would be fully implemented in 2017 based on The Property Tax Act 2009, with minor amendments to the Valuation of Land Act.

He said new tax invoices would be issued in 2017, subsequent to the completion of the Valuation Roll prepared by the Commissioner of Valuations and the Assessment Roll prepared by the Inland Revenue Division. The Valuation Roll is a listing of all properties in Trinidad and Tobago.

This Roll is prepared in accordance with Sec. 16 (1) of the Valuation of Land Act Chpt 58:03.

Under the Valuations of Land Act, every owner is required to submit a return which will be used by the Valuation Division to calculate the annual rental value, failing which the Division will prepare its own valuation.

All properties in Trinidad and Tobago have a rental value and possess the potential to be rented, whether the intention of the owner is to rent it or not.

The rental value is determined by the rent the property will obtain on the open market (if it were put up for rent), according to the Ministry.

Residential homeowners are required to submit:
• A previous Land & Building Taxes Receipt for property identified;
• Deed/RPO Certificate of Title;
• Land Survey Plan or Land Area;
• Site Plan; • Building Plan;
• Rent/Lease Agreement;
• Completion Certificate;
• Town and Country Planning Approval (status of land);
• Town and Country Planning Approved Use (change of use), as well as a photograph of the exterior of the property;
• A sketch of building;
• WASA Bill (no more than three months old);
• TTEC Bill (no more than three months old)
Commercial landowners are required to also produce documents pertaining to residential landowners, including:
• Land Survey Plan or land area;
• OSHA Certificate;
• Letter from Designs Engineering Branch of Ministry of Works & Transport;
• Certificate of Incorporation;
• Certificate of Continuance; and
• Annual Return of a Company for Profit Incorporated, Continued or Amalgamated under the Companies Act 1995.

Under the Valuation of Land Act 18 of 1969, homeowners who fail to make a return within the prescribed time under subsection (1); or makes a return which is defective or incomplete or which is to his knowledge false in any material particular, “commits an offence and is liable on summary conviction to a fine.” The fine is not outlined in the Act.

According to the Ministry of Finance’s website, which has several pages dedicated to the issue, properties are expected to be accessed by Valuers, who take several factors into account in calculating the unit value of the property, which are used to calculate your property’s rental value including the classification of the property (executive, modern, standard I and standard II) depending on the features of the building – leisure facilities, number of bedrooms, bathrooms, types of utilities available, special rooms such as game room.

A standard home one is a one bathroom; a standard home two features between one and two bathrooms, while a modern home has at least one en suite bathroom with a specialty room.

An executive home may have at least as many bathrooms as there are bedrooms and specialised areas such as a separate room for dining, office, library etc.

Not all properties on the same street have the same property taxes to pay, as the rental values of houses, on the same street may vary according to classification of the building, floor area of the building, age, condition and internal layout of the building.

The Ministry also noted that for persons who operate a small business from their home, their properties would be assessed by its proportional use to determine whether they pay residential or commercial taxes.

Property evaluations are expected to take place every five years. However, if during that period any material change is done to the property, such as change of ownership, subdivision, improvements or any other changes as identified in Section 9 of the Valuation of Land Act, the Commissioner of Valuations may make changes to the Valuation Roll as necessary, the Ministry stated.

There is also an Annual Rental Value of vacant land, which would be calculated by taking a percentage of the Current Market Value of the land with Agricultural: 2%; Residential: 3.5%; and Commercial and Industrial: 5%. Under the Act, all land in Trinidad and Tobago is liable to taxation though there are notable exemptions such as lands used exclusively as “churches, chapels and places of public worship of any religious denomination and every cemetery or burial ground that is enclosed and actually required, used and occupied for the interment of the dead, but not land that is rented or leased by a church or religious organisation to a person other than another church or religious organisation.” Exceptions were also granted to school buildings, offices and playgrounds; charitable institutions as well as public hospitals, public asylums and all alms-houses, and institutes of tertiary education such as the University of the West Indies, University of Trinidad and Tobago; the College of Science, Technology and Applied Arts, (COSTAATT); and the University of the Southern Caribbean.

Properties owned by foreign government or international organisation of which Trinidad and Tobago is a member are also exempted under the Act.

However, Housing Development Corporation (HDC) homeowners – those who have purchased their homes – would have to pay property tax on those properties.

Housing Minister, Randall Mitchell, in a message noted that HDC tenants and licensees would not have to pay, but noted that the Ministry would be guided by the Ministry of Finance. There are instances in which property tax can be deferred. According to the Ministry, the Board of Inland Revenue may “upon the application of the owner of land, authorise the deferral of the payment of the assessed tax on the land on the grounds of the impoverished condition of the owner and his inability to improve his financial position significantly by reason of age, impaired health or other special circumstances, that undue hardship to that owner would otherwise ensue.” Pensioners, however would not be exempt from paying property tax though this may be deferred upon application and approval by the Board of Inland Revenue.